G.R. No. L-17436, Equitable Insurance and Casualty Co.

Inc. v. Rural Insurance and Surety Co. Inc., 4 SCRA 343

Republic of the Philippines
SUPREME COURT
Manila
EN BANC
January 31, 1962
G.R. No. L-17436
EQUITABLE INSURANCE AND CASUALTY COMPANY,
INC., plaintiff-appellee,
vs.
RURAL INSURANCE AND SURETY COMPANY,
INC., defendant-appellant.
K. V. Faylona and M. R. Nadres for plaintiff-appellee.
Gunlao, Laxamana and Aquino for defendant-appellant.
BARRERA, J.:
On May 26, 1959, plaintiff Equitable Insurance and
Casualty Company, Inc. filed with the Court of First
Instance of Manila a complaint (Civil Case No. 40282)
against defendant Rural Insurance and Surety Company,
Inc. alleging, as first cause of action, that on November
11, 1957, plaintiff and defendant entered into a
reciprocal facultative reinsurance agreement, wherein
they agreed to cede to each other, by way of facultative
reinsurance on policies of insurance or reinsurance
issued by their respective fire insurance departments on
risks situated in the Philippines, subject to the
stipulations of the agreement; that pursuant to said
agreement, plaintiff on January 29, 1958, reinsured for
P2,000.00 with defendant as per Reinsurance
Application No. 58/038 and accepted by defendant on
the same date, the stock covered by fire insurance
Policy No. 5880 issued by plaintiff in behalf of Messrs.
Jaen Bermers' Cooperative Marketing Association, Inc.:
that on July 4, 1958, the stock insured and covered by
said Policy No. 5880 was burned, and the share of the
loss assumed by defendant as per reinsurance
agreement was computed at P2,024.87 including
adjuster's fee, for which plaintiff sent to defendant for
payment by the latter, a statement of account dated
March 12, 1959; that despite repeated demands by
plaintiff, defendant refused and failed to pay the sum of
P2,024.87. On the second cause of action, plaintiff on
March 24, 1958 reinsured in the sum of P2,000.00 with
defendant as per Reinsurance Application No. 58/115
and accepted by defendant on the same date, stock
covered by fire insurance Policy No. 6026, issued by
plaintiff in behalf of Electric and Lamp Supplies (Mr.
Pedro Casipe); that on October 13, 1958, said stock was
burned and the share of loss assumed by defendant as
per reinsurance agreement with plaintiff was computed
at P1,334.80 including adjuster's fee, for which plaintiff
likewise sent a statement of account dated February 4,

1959, to defendant with the request that the same be

paid; that notwithstanding repeated demands,
defendant refused and failed to pay plaintiffs; and that
for defendant's failure to pay its share of the losses
assumed by it, plaintiff has been compelled to institute
the present action and to incur attorney's fees and
expenses of litigation amounting to P500.00. Plaintiff
prayed for judgment ordering the defendant to pay said
sums of P2,024.80 and P1,334.80 with legal interest
thereon from the date of the filing of the complaint
until fully paid, P500.00 as attorney's fees, and the costs
of the suit.
On June 9, 1959, defendant filed a motion to dismiss
said complaint, on the ground that it states no cause of
action, as pursuant to Article VIII of the Reinsurance
Agreement between the parties, before a court action
can be brought, the parties agreed to submit all
disputes to a board of arbitrators. To this motion,
plaintiff duly filed an opposition. On June 16, 1959, the
court denied said motion to dismiss for lack of merit
and required defendant to answer.
On June 20, 1959, defendant flied its answer alleging as
affirmative defenses that paragraph 3, Article III of the
Reciprocal Reinsurance Agreement between the parties
is controlled by Article VIII thereof, that the nature of
the agreement is "self-liquidating between the parties"
the reinsurer becoming a reinsured, and the reinsured
becoming reinsurer; and that said agreement has not
yet been abrogated, so that plaintiff's liability to
defendant is not yet known, nor the liability of
defendant to plaintiff. Defendant prayed that the
complaint be dismissed and that plaintiff be ordered to
pay to it attorney's fees in the sum of P700.00 and the
costs of the suit.
On July 8, 1959, plaintiff filed a motion for judgment on
the pleadings, which was opposed by defendant on July
13. On July 15, 1959, the court issued an order denying
said motion.
Instead of going into a formal hearing, the parties on
August 12, 1959, submitted the case for decision on the
following stipulation of facts:
1. That the defendant admits the allegations contained
in paragraphs 1, 2, 3, 4 and all other allegations of the
complaint, including the letter of the Assistant
Insurance Commissioner, addressed to Miss
Anunciacion Aznar, President of the Rural Insurance &
Surety Co., dated May 4, 1959, which reads as follows:
"MADAM:
"We are enclosing herewith copy of the self-explanatory
letter of Mr. S. A. Santos, General Manager of the
above-subject company, dated April 11, 1959, with the
request that we be favored with your comments thereon
at an early date.

"Kindly give your preferential attention hereto."

2. That plaintiff admits that the issues and/or dispute
subject of the present complaint were not submitted to
a Board of Arbitrators and umpire, as provided in
paragraph VIII of Annex 'A' to the complaint, but instead
the matter was referred to the Insurance Commissioner
as evidenced by the letter of said office quoted above."
(Emphasis supplied.) .
On October 16, 1959, the court rendered a decision the
dispositive part of which reads:
IN VIEW OF ALL THE FOREGOING, judgment is hereby
rendered in favor of the plaintiff Equitable Insurance &
Casualty Co., Inc. and against the defendant Rural
Insurance & Surety Co., Inc., ordering the latter to pay
to the former the sum of P2,024.87, under the first
cause of action, with legal interest from the date of the
filing of the complaint until fully paid; the sum of
P1,334.80, under the second cause of action with legal
interest from the date of the filing of the complaint,
until fully paid; plus the further sum of P500.00 as
attorney's fees and the costs of the suit.
From this decision, defendant appealed to the Court of
Appeals which elevated the case to us, no question of
fact being involved.
Under his first assignment of error, defendant-appellant
insists that the trial court erred in failing to rule that
plaintiff-appellee has no causes of action against it, the
matter not having been referred to the decision of two
arbitrators or umpire, which, it is claimed, is the
condition precedent agreed upon in Article VIII of the
Reinsurance Agreement entered into between the
parties, to wit:
ARTICLE VIII
In the event of any question arising as to the meaning
of, or any way connected with or relating to this
Agreement, whether before or after its termination, the
parties shall endeavor to arrive at a satisfactory
compromise by amicable settlement rather than by
court action. The dispute shall be referred to the
decision of two arbitrators, of whom one shall be
appointed in writing by each of the parties within thirty
(30) days after having been required so to do by the
other party in writing, and in case of disagreement
between the arbitrators, to the decision of the umpire
to be appointed by them in writing before entering on
the reference. Each party shall submit its case with all
particulars within thirty days after their appointment.
The seat of arbitration shall be in Manila, Philippines,
and the expenses of arbitration shall be borne in equal
proportion by the parties. The decision of the
arbitrators or umpire, as the case may be, shall be final
and binding on both the Company and the Reinsurer.
The arbitrators and umpire shall not be bound by the

strict rules of evidence and by judicial formalities in

making the award.
It is contended that this agreement, not being contrary
to law, moral or public policy but, on the other hand,
dictated by 'wisdom and propriety in insurance
contracts because losses by fire can duly be determined
by competent men who have technical knowledge on
how to determine losses by fire", non-compliance
therewith is fatal to the claim of plaintiff-appellee.
We find no merit in this contention. Under the
abovequoted provision of the Reinsurance Agreement,
it would seem clear that the requirement of submitting
for decision to two arbitrators or an umpire the matter
of losses by fire or the liability of the parties thereto
arises only if and when the same is disputed by one of
the parties. It does not appear in the instant case that
appellant did dispute appellee's claims. Consequently,
appellant may not invoke said provision in avoidance of
its liability to appellee. On this point, the trial court
correctly made the following observations, to which we
fully agree and adopt as our own:
It is true that paragraph (Article VIII) of said Reciprocal
Facultative Reinsurance Agreement required that 'in the
event of any question arising as to the meaning of, or
any way connected with or relating to this Agreement,
whether before or after its termination, the parties shall
endeavor to arrive at a satisfactory compromise by
amicable settlement rather than by court action'; and
that the dispute should be referred to the decision of
two arbitrators and umpire, as provided, therein.
However, in this particular case, there is absolutely no
dispute between the two parties, because in the
stipulation of facts, the defendant has admitted that
plaintiff has paid its liability to the insured as per its fire
insurance policies specified in the two causes of action
of the complaint. Defendant has, likewise, admitted its
liability as reinsurer under the Reciprocal Facultative
Reinsurance Agreement (Annex "A" to the complaint) to
pay to the plaintiff its proportional shares, the amounts
of which are not disputed. Indeed, according to the
complaint as admitted by the defendant, statements of
account as to the amounts of its share as reinsurer and,
for all that appears, said defendant has never
questioned the correctness of said amounts. It is,
likewise, admitted by the defendant in the stipulation of
facts, that because of its failure to pay said amounts,
the plaintiff, on April 11, 1959, complained to the
Assistant Insurance Commissioner, for official
intervention, but said defendant has continued to
ignore plaintiff's demands for reimbursement under the
reinsurance policies.

Moreover, as decided by the Court of Appeals in the

case of Buenaventura Maligad v. United Assurance Co.,
Inc., 55 O.G. 6041:
If in the course of the settlement of a loss, the action of
the company or its agents amounts to a refusal to pay,
the company will be deemed to have waived the
condition precedent with reference to arbitration and a
suit upon the policy will lie. (Chang v. Assurance
Corporation, 8 Phil. 399.) Emphasis supplied.
In the second and last assignment of error, appellant
claims that "the court a quo erred in failing to rule that
in a facultative obligation the right to choose an
alternative remedy lies only with the debtor, who in this
case is the herein defendant-appellant", and in support
thereof, cites Article 1206 of the new Civil Code.
We find no connection whatsoever between this article
and the agreement subject of this action, except the
word "facultative" used in both. The term "facultative"
is used in reinsurance contracts, and it is so used in this
particular case, merely to define the right of the
reinsurer to accept or not to accept participation in the
risk insured. But once the share is accepted, as it was in
the case at bar, the obligation is absolute and the
liability assumed thereunder can be discharged by one
and only way payment of the share of the losses.
There is no alternative nor substitute prestation.
WHEREFORE, finding no error in the judgment appealed
from of the trial court, the same is hereby affirmed,
with costs against the defendant-appellant. So ordered.
Bengzon, C.J., Padilla, Bautista Angelo, Labrador,
Concepcion, Reyes, J.B.L., Paredes, Dizon and De Leon,
JJ., concur.

Facts: Equitable reinsured with Rural the stock covered

by the fire insurance policy issued by Equitable to
Messrs. Jaen Bermers Cooperative Marketing
Association, Inc. The stocks were burned. A statement
of account covering the share of the loss assumed by
Rural was sent by Equitable. Despite repeated demands
Rural refused to pay.

Equitable likewise reinsured with Rural the stocks of

Electric and Lamp Supplies covered by fire insurance
policies. The stocks were burned. Rural refused to pay
its share of loss. Hence this complaint for recovery was
filed. Rural moved for its dismissal alleging that there is
no cause of action. Invoking Article VIII of the
Reinsurance Agreement, it alleged that the matter

should be brought to the board of arbitrators before the

court action could take place. Motion to dismiss denied.
The RTC ruled in favor of Equitable. The appeal to CA
was brought to the SC.

Issue: Whether or not Equitable has a cause of action

against Rural.

Held: Yes. It is true that paragraph (Article VIII) of said

ReciprocalFacultative Reinsurance Agreement required
that 'in the event of any question arising as to the
meaning of, or any way connected with orrelating to
this Agreement, whether before or after its termination,
the parties shall endeavor to arrive at a satisfactory
compromise by amicable settlement rather than by
court action'; and that the dispute should be referred to
the decision of two arbitrators and umpire, as provided,
therein. However, in this particular case, there is
absolutely no dispute between the two parties, because
in the stipulation of facts, the defendant has admitted
that plaintiff has paid its liability to the insured as per its
fire insurance policies specified in the two causes of
action of the complaint. Defendant has, likewise,
admitted its liability as reinsurer under the
Reciprocal FacultativeReinsurance Agreement to pay to
the plaintiff its proportional shares, the amounts of
which are not disputed. Indeed, according to the
complaint as admitted by the defendant, statements of
account as to the amounts of its share as reinsurer and,
for all that appears, said defendant has never
questioned the correctness of said amounts.

The appellants claim that the court erred in failing to

rule that in afacultative obligation the right to choose
an alternative remedy lies only with the debtor, who in
this case is Rural was held untenable. The term
"facultative" is so used in reinsurance contracts merely
to define the right of the reinsurer to accept or not to
accept participation in the risk insured. But once the
share is accepted, as it was in the case at bar, the
obligation is absolute and the liability assumed
thereunder can be discharged by payment of the share

of the losses. There is no alternative nor substitute

prestation.

G.R. No. L-17312

November 29, 1965

ARTURO R. TANCO, JR., plaintiff-appellee,

vs.
THE PHILIPPINE GUARANTY COMPANY, defendantappellant.
Manuel Y. Macias and Julio R. Vicencio for plaintiffappellee.
Rufino Y. Luna and Josue H. Gustilo for defendantappellant.
MAKALINTAL, J.:
Plaintiff's automobile, while being driven at the
southern approach of the Jones bridge by his brother
Manuel Tanco on September 1, 1959, figured in a
collision with a pick-up delivery van, as a result of which
both vehicles were damaged. Plaintiff paid for repairs
the total sum of P2,536.99 and then filed his claim with
defendant company under a car insurance policy issued
by the latter. The claim was rejected, whereupon suit
was commenced in the Municipal Court of Manila,
whence it was elevated on appeal to the Court of First
Instance of Manila, which gave judgment for plaintiff in
the amount stated, plus interest at 8% and P500.00 as
attorney's fees. Appeal was taken by defendant directly
to this Court, there being no dispute as to the facts.
The policy sued upon covers, up to a certain limit, loss
or damage to the insured vehicle as well as damage to
property of third persons as a consequence of or
incident to the operation of said vehicle. There is an
exception clause, however, which provides that "the
company shall not be liable in respect of any accident,
loss, damage or liability caused, sustained or incurred ...
whilst (the insured vehicle) is ... being driven by or is for
the purpose of being driven by him in the charge of any
person other than an Authorized Driver." The policy
defined the term "Authorized Driver" to be the insured
himself and "(b) any person driving on the Insured's
order or with his permission, provided that the person
driving is permitted in accordance with the licensing or
other laws or regulations to drive the Motor Vehicle or
has been permitted and is not disqualified by order of a
court of law or by reason of any enactment or
regulation in that behalf from driving such Motor
Vehicle."

At the time of the collision plaintiff's brother who was

at the wheel, did not have a valid license, the one he
had obtained for the year 1958 not having been
renewed on or before the last working day of February
1959, as required by section 31 of the Motor Vehicle
Law, Act No. 3992. That section states that any license
not so renewed "shall become delinquent and invalid,"
and section 21 states that "except as otherwise
specifically provided in this Act no person shall operate
any motor vehicle on the public highways without
having procured a license for the current year, nor while
such license is delinquent, invalid, suspended or
revoked."
In rendering judgment for plaintiff the trial court
adverted to the absence of evidence that Manuel Tanco
had been "disqualified by order of a court of law or by
reason of any enactment or regulation in that behalf
from driving such motor vehicle," and ruled that if there
is any ambiguity in the definition of the term
"authorized driver" in the policy the ambiguity should
be construed in favor of plaintiff, since the policy had
been prepared in its entirety by defendant. The trial
court's advertence is true as a matter of fact; and its
ruling is correct as a matter of law. But neither one nor
the other is relevant in this case. Appellant does not rely
on the portion of the proviso in the policy quoted by the
court but on that which states that "the person driving
is permitted in accordance with the licensing or other
laws." And as to this there is no ambiguity whatsoever,
because the Motor Vehicle Law expressly prohibits any
person from operating a motor vehicle on the highways
without a license for the current year or while such
license is delinquent or invalid. That Manuel Tanco
renewed his license on September 8,1959, one week
after the accident did not cure the delinquency or
revalidate the license which had already expired.
We are not aware that the question presented here has
been decided by this Court in any previous case. Indeed
all the authorities cited by the parties consist of
decisions Courts United States. We note, however, that
those relied upon by appellee are not in point by reason
of material differences in the facts or issues presented.
InMessersmith vs. American Fidelity Co., 187 App. Div.
35, 175 N.Y. Supp. 169; and Fireman's Fund Insurance
Co. vs. Haley, 129 Miss. 525, 90 So. 635, the question
was whether the insured could recover on an
automobile policy for damage sustained in a collision
which occurred while the vehicle was being driven in
violation of law in the first case by an infant at the
instance of the insured, and in the second by the
insured himself beyond the statutory speed limit. In

neither case was there a provision in the policy

expressly excluding liability by reason of the particular
violation involved. We have no reason to disagree with
the pronouncement of the court in the second case,
after citing the first, that "if such a defense (that the
vehicle was being driven in violation of law) were
permissible automobile insurance would be practically
valueless."
In MacMahon vs. Pearlman, 13 N.E. 154-156, a
Massachusetts case, the defense of the insurer was also
the violation of law by the insured, namely, that she
was driving without a license; but as stated in the
decision, "the casualty company does not urge that the
unlawful conduct is forbidden in express terms, (but)
that because of public policy it ought not to be
compelled to pay damages." The court,
citing Messersmith v. American Fidelity Co., supra,
similarly allowed recovery, saying that to restrict such
insurance to cases where there has been no violation of
criminal law or ordinance would reduce indemnity to a
shadow.
In the case before Us now appellant's defense does not
rest on the general proposition that if a law is violated
at the time of the accident which causes the damage or
injury there can be no recovery, but rather on a specific
provision in the policy that appellant shall not be liable
if the accident occurs while the vehicle is being driven
by any person other than an authorized driver and that
an authorized driver, if not the insured himself, is one
who is acting on his order or with his permission,
provided he is permitted to drive under the licensing
laws.
The cases cited by appellant are apropos. In Crahan v.
Automobile Underwriters, Inc., et al., 176 A. (Pa.) 817, a
clause in the policy excluding loss while the motor
vehicle "is being operated by any person prohibited by
law from driving an automobile" was held to be free
from doubt or ambiguity, reasonable in its terms and in
furtherance of the policy of the law prohibiting
unlicensed drivers to operate motor vehicles.
In Zabonick v. Ralston, et al., 261 N.W. (Mich.) 316, the
insured was driving with an expired license, in violation
of law (Act No. 91 of the Public Acts of 1931), when the
accident occurred. Under a provision in the policy that
the insurer "shall not be liable while the automobile is
operated ... by any person prohibited by law from
driving," the insurance company was absolved, the
Supreme Court of Michigan saying: "To require a person
to secure an operator's license and meet certain
requirements before driving an automobile is a

regulation for the protection of life and property, the

wisdom of which can scarcely be questioned. The
Legislature has also provided that every three years
such licenses expire and may be renewed under certain
conditions. If one fails to comply with the regulation,
the statute says, he or she shall not drive a motor
vehicle upon the highway. Under the terms of the
contract, while under such statutory prohibition,
plaintiff could not recover under his policy. To permit
such recovery, notwithstanding the lack of a driver's
license, would tend to undermine the protection
afforded the public by virtue of Act No. 91."
The exclusion clause in the contract invoked by
appellant is clear. It does not refer to violations of law in
general, which indeed would tend to render automobile
insurance practically a sham, but to a specific situation
where a person other than the insured himself, even
upon his order or with his permission, drives the motor
vehicle without a license or with one that has already
expired. No principle of law or of public policy militates
against the validity of such a provision.
The judgment appealed from is reversed, with costs.
FACTS:

While Tanco's automobile was driven by his brother

Manuel Tanco, who at the time didn't have a valid
license since it was not renewed until the next
week, had a collision with a pick-up delivery van at
the southern approach of the Jones bridge
The repairs cost P2,536.99 so he filed a claim
against the insurance company which was rejected
He filed a claim in the Municipal Court of Manila
and elevated to the Court of First Instance of
Manila on Appeal which favored Tanco
exception clause "the company shall not be liable in
respect of any accident, loss, damage or liability
caused, sustained or incurred ... whilst (the insured
vehicle) is ... being driven by or is for the purpose of
being driven by him in the charge of any person

other than an Authorized Driver.

Authorized Driver" to be the insured himself and
"(b) any person driving on the Insured's order or
with his permission, provided that the person
driving is permitted in accordance with the licensing
or other laws or regulations to drive the Motor

Vehicle or has been permitted and is not

disqualified by order of a court of law or by reason
of any enactment or regulation in that behalf from
driving such Motor Vehicle.
ISSUE: W/N the Tanco can claim because it was not
covered by the exemption clause
HELD: NO. appealed from is reversed, with costs

The exclusion clause in the contract invoked by

appellant is clear. It does not refer to violations of
law in general, which indeed would tend to render
automobile insurance practically a sham, but to a
specific situation where a person other than the
insured himself, even upon his order or with his
permission, drives the motor vehicle without a
license or with one that has already expired. No
principle of law or of public policy militates against
the validity of such a provision.

G.R. No. L-8151

December 16, 1955

VIRGINIA CALANOC, petitioner,

vs.
COURT OF APPEALS and THE PHILIPPINE AMERICAN
LIFE INSURANCE CO., respondents.
Lucio Javillonar for petitioner.
J. A. Wolfson, Manuel Y. Mecias, Emilio Abello and
Anselmo A. Reyes for respondents.

BAUTISTA ANGELO, J.:

This suit involves the collection of P2,000 representing
the value of a supplemental policy covering accidental
death which was secured by one Melencio Basilio from
the Philippine American Life Insurance Company. The
case originated in the Municipal Court of Manila and
judgment being favorable to the plaintiff it was
appealed to the court of first instance. The latter court
affirmed the judgment but on appeal to the Court of
Appeals the judgment was reversed and the case is now
before us on a petition for review.

Melencio Basilio was a watchman of the Manila Auto

Supply located at the corner of Avenida Rizal and
Zurbaran. He secured a life insurance policy from the
Philippine American Life Insurance Company in the
amount of P2,000 to which was attached a
supplementary contract covering death by accident. On
January 25, 1951, he died of a gunshot wound on the
occasion of a robbery committed in the house of Atty.
Ojeda at the corner of Oroquieta and Zurbaan streets.
Virginia Calanoc, the widow, was paid the sum of
P2,000, face value of the policy, but when she
demanded the payment of the additional sum of P2,000
representing the value of the supplemental policy, the
company refused alleging, as main defense, that the
deceased died because he was murdered by a person
who took part in the commission of the robbery and
while making an arrest as an officer of the law which
contingencies were expressly excluded in the contract
and have the effect of exempting the company from
liability.
The pertinent facts which need to be considered for the
determination of the questions raised are those
reproduced in the decision of the Court of Appeals as
follows:
The circumstances surrounding the death of
Melencio Basilio show that when he was killed
at about seven o'clock in the night of January
25, 1951, he was on duty as watchman of the
Manila Auto Supply at the corner of Avenida
Rizal and Zurbaran; that it turned out that Atty.
Antonio Ojeda who had his residence at the
corner of Zurbaran and Oroquieta, a block away
from Basilio's station, had come home that
night and found that his house was well-lighted,
but with the windows closed; that getting
suspicious that there were culprits in his house,
Atty. Ojeda retreated to look for a policeman
and finding Basilio in khaki uniform, asked him
to accompany him to the house with the latter
refusing on the ground that he was not a
policeman, but suggesting that Atty. Ojeda
should ask the traffic policeman on duty at the
corner of Rizal Avenue and Zurbaran; that Atty.
Ojeda went to the traffic policeman at said
corner and reported the matter, asking the
policeman to come along with him, to which the
policeman agreed; that on the way to the Ojeda
residence, the policeman and Atty. Ojeda
passed by Basilio and somehow or other invited
the latter to come along; that as the tree
approached the Ojeda residence and stood in

front of the main gate which was covered with

galvanized iron, the fence itself being partly
concrete and partly adobe stone, a shot was
fired; that immediately after the shot, Atty.
Ojeda and the policeman sought cover; that the
policeman, at the request of Atty. Ojeda, left
the premises to look for reinforcement; that it
turned out afterwards that the special
watchman Melencio Basilio was hit in the
abdomen, the wound causing his instantaneous
death; that the shot must have come from
inside the yard of Atty. Ojeda, the bullet passing
through a hole waist-high in the galvanized iron
gate; that upon inquiry Atty. Ojeda found out
that the savings of his children in the amount of
P30 in coins kept in his aparador contained in
stockings were taken away, the aparador having
been ransacked; that a month thereafter the
corresponding investigation conducted by the
police authorities led to the arrest and
prosecution of four persons in Criminal Case
No. 15104 of the Court of First Instance of
Manila for 'Robbery in an Inhabited House and
in Band with Murder'.
It is contended in behalf of the company that Basilio
was killed which "making an arrest as an officer of the
law" or as a result of an "assault or murder" committed
in the place and therefore his death was caused by one
of the risks excluded by the supplementary contract
which exempts the company from liability. This
contention was upheld by the Court of Appeals and, in
reaching this conclusion, made the following comment:
From the foregoing testimonies, we find that
the deceased was a watchman of the Manila
Auto Supply, and, as such, he was not boud to
leave his place and go with Atty. Ojeda and
Policeman Magsanoc to see the trouble, or
robbery, that occurred in the house of Atty.
Ojeda. In fact, according to the finding of the
lower court, Atty. Ojeda finding Basilio in
uniform asked him to accompany him to his
house, but the latter refused on the ground that
he was not a policeman and suggested to Atty.
Ojeda to ask help from the traffic policeman on
duty at the corner of Rizal Avenue and
Zurbaran, but after Atty. Ojeda secured the help
of the traffic policeman, the deceased went
with Ojeda and said traffic policeman to the
residence of Ojeda, and while the deceased was
standing in front of the main gate of said
residence, he was shot and thus died. The

death, therefore, of Basilio, although

unexpected, was not caused by an accident,
being a voluntary and intentional act on the
part of the one wh robbed, or one of those who
robbed, the house of Atty. Ojeda. Hence, it is
out considered opinion that the death of
Basilio, though unexpected, cannot be
considered accidental, for his death occurred
because he left his post and joined policeman
Magsanoc and Atty. Ojeda to repair to the
latter's residence to see what happened
thereat. Certainly, when Basilio joined
Patrolman Magsanoc and Atty. Ojeda, he should
have realized the danger to which he was
exposing himself, yet, instead of remaining in
his place, he went with Atty. Ojeda and
Patrolman Magsanoc to see what was the
trouble in Atty. Ojeda's house and thus he was
fatally shot.
We dissent from the above findings of the Court of
Appeals. For one thing, Basilio was a watchman of the
Manila Auto Supply which was a block away from the
house of Atty. Ojeda where something suspicious was
happening which caused the latter to ask for help.
While at first he declied the invitation of Atty. Ojeda to
go with him to his residence to inquire into what was
going on because he was not a regular policeman, he
later agreed to come along when prompted by the
traffic policeman, and upon approaching the gate of the
residence he was shot and died. The circumstance that
he was a mere watchman and had no duty to heed the
call of Atty. Ojeda should not be taken as a capricious
desire on his part to expose his life to danger
considering the fact that the place he was in dutybound to guard was only a block away. In volunteering
to extend help under the situation, he might have
thought, rightly or wrongly, that to know the truth was
in the interest of his employer it being a matter that
affects the security of the neighborhood. No doubt
there was some risk coming to him in pursuing that
errand, but that risk always existed it being inherent in
the position he was holding. He cannot therefore be
blamed solely for doing what he believed was in
keeping with his duty as a watchman and as a citizen.
And he cannot be considered as making an arrest as an
officer of the law, as contended, simply because he
went with the traffic policeman, for certainly he did not
go there for that purpose nor was he asked to do so by
the policeman.
Much less can it be pretended that Basilio died in the
course of an assault or murder considering the very

nature of these crimes. In the first place, there is no

proof that the death of Basilio is the result of either
crime for the record is barren of any circumstance
showing how the fatal shot was fired. Perhaps this may
be clarified in the criminal case now pending in court as
regards the incident but before that is done anything
that might be said on the point would be a mere
conjecture. Nor can it be said that the killing was
intentional for there is the possibility that the
malefactor had fired the shot merely to scare away the
people around for his own protection and not
necessarily to kill or hit the victim. In any event, while
the act may not excempt the triggerman from liability
for the damage done, the fact remains that the
happening was a pure accident on the part of the
victim. The victim could have been either the policeman
or Atty. Ojeda for it cannot be pretended that the
malefactor aimed at the deceased precisely because he
wanted to take his life.
We take note that these defenses are included among
the risks exluded in the supplementary contract which
enumerates the cases which may exempt the company
from liability. While as a general rule "the parties may
limit the coverage of the policy to certain particular
accidents and risks or causes of loss, and may expressly
except other risks or causes of loss therefrom" (45 C. J.
S. 781-782), however, it is to be desired that the terms
and phraseology of the exception clause be clearly
expressed so as to be within the easy grasp and
understanding of the insured, for if the terms are
doubtful or obscure the same must of necessity be
interpreted or resolved aganst the one who has caused
the obscurity. (Article 1377, new Civil Code) And so it
has bene generally held that the "terms in an insurance
policy, which are ambiguous, equivacal, or uncertain . .
. are to be construed strictly and most strongly against
the insurer, and liberally in favor of the insured so as to
effect the dominant purpose of indemnity or payment to
the insured, especially where a forfeiture is involved"
(29 Am. Jur., 181), and the reason for this rule is that he
"insured usually has no voice in the selection or
arrangement of the words employed and that the
language of the contract is selected with great care and
deliberation by experts and legal advisers employed by,
and acting exclusively in the interest of, the insurance
company." (44 C. J. S., p. 1174.)
Insurance is, in its nature, complex and difficult
for the layman to understand. Policies are
prepared by experts who know and can
anticipate the bearings and possible
complications of every contingency. So long as

insurance companies insist upon the use of

ambiguous, intricate and technical provisions,
which conceal rather than frankly disclose, their
own intentions, the courts must, in fairness to
those who purchase insurance, construe every
ambiguity in favor of the insured. (Algoe vs.
Pacific Mut. L. Ins. Co., 91 Wash. 324, LRA
1917A, 1237.)lawphi1.net
An insurer should not be allowed, by the use of
obscure phrases and exceptions, to defeat the
very purpose for which the policy was procured.
(Moore vs. Aetna Life Insurance Co., LRA 1915D,
264.)
We are therefore persuaded to conclude that the
circumstances unfolded in the present case do not
warrant the finding that the death of the unfortunate
victim comes within the purview of the exception clause
of the supplementary policy and, hence, do not exempt
the company from liability.
Wherefore, reversing the decision appealed from, we
hereby order the company to pay petitioner-appellant
the amount of P2,000, with legal interest from January
26, 1951 until fully paid, with costs.
CALANOC v CA (G.R. L-8151): Melencio Basilio was a
security guard who died while on duty. The insurance
company paid his widow, Virginia Calanoc, the face
value of the policy, P2,000, but refused to give the
additional sum of P2,000 in the supplementary contract
covering death by accident. The insurance company said
he was killed by someone participating in a robbery and
while making an arrest, two contingencies expressly
excluded in the contract.
Basilio was killed as he stood outside the iron gate of
Atty Ojeda, as they tried to get into the house where
they suspected a robber had broken into.
The Court of Appeals upheld the company, that said
Basilios killing was not an accident, but rather an
intentional act on the part of the robber. The Supreme
Court ruled that there was no proof that it was
intentional, that the robber had aimed for Basilio,
because there was nothing on record that showed how
the fatal shot was fired while it was an accident on the
part of Basilio. The house being robbed was not the one
he was guarding, and he had earlier refused to go to the
house without a policeman. Insurer ordered to pay.
BIAGTAN v CA (G.R. L-25579): Biagtan was killed as his
house was being robbed. The insurance company paid
the basic amount of P5,000 but refused to pay the
additional P5,000 under the accidental death benefit

clause, on the ground that his death was the result of

injuries intentionally inflicted by third parties and was
not covered. The trial court ruled that there was no
proof that the robbers intended to kill Biagtan, or just to
scare him away by thrusting at him with their knives.
The Supreme Court held otherwise, pointing out that
there were nine wounds in all. The exception in the
accidental benefit clause does not speak of the purpose
whether homicidal or not of a third party in causing
the injuries, but only of the fact that such injuries have
been intentionally inflicted. Nine wounds inflicted with
bladed weapons at close range cannot be considered
innocent insofar as intent is concerned. The manner of
execution of the crime permits no other conclusion.
Dissent: The case of Calanoc is controlling. The thrusts
seemed to be a reflex action on the part of the robbers
upon being surprised by Biagtan. The accidental death
benefit clause carries several exceptions, with an
ambiguous fifth paragraph saying that injuries inflicted
intentionally by a third party were among the
exceptions. The ambiguous clause conflicts with all the
other four exceptions and seemingly except all other
injuries, intentionally inflicted by a third party,
regardless of any violation of law or provocation by the
insured, and defeat the very purpose of the policy of
giving the insured double indemnity in case of
accidental death by external and violent means.
Applying the rule of noscitus a sociis, the double
indemnity policy covers the insured against accidental
death, whether caused by fault, negligence or intent of
a third party which is unforeseen and unexpected by
the insured. All the associated words and concepts in
the policy plainly exclude the accidental death from the
coverage of the policy only where the injuries are selfinflicted or attended by some proscribed act of the
insured or incurred in some expressly included calamity
such as riot, war or atomic explosion. Besides, two
other insurance companies which also covered the
insured paid the benefits.

[G.R. No. 101439. June 21, 1999]

GOVERNMENT
SERVICE
INSURANCE
SYSTEM
(GSIS), petitioner, vs. COURT
OF APPEALS
(former Tenth Division), VICTORIA JAIME VDA.
DE KHO, for herself and minor ROY ROLAND,
GLORIA KHO VDA. DE CALABIA for herself and

minors MARY GRACE, WILLIE, JR., VOLTAIRE,

GLENN, and MAY, all surnamed CALABIA,
DANIEL KHO, JOSEFINA KHO, EMERITA KHO
APEGO, ANTONIO KHO and TERESITA
KHO, respondents.
DECISION
QUISUMBING, J.:
In this petition for review on certiorari under Rule
45 of the Rules of Court, petitioner Government Service
Insurance System (GSIS) assails the January 15, 1991
Decision[1] of the Court of Appeals in CA-G.R. No. 19849,
which affirmed in toto the judgment of the Regional
Trial Court of Butuan City, Branch II, dated April 30,
1985, stating in part:
WHEREFORE, judgment is hereby rendered, as follows:
xxx
In Civil Case No. 2256:
a) Dismissing the complaint against defendant Victor
Uy;
b) Ordering defendants Mabuhay Insurance and
Guaranty Company, Inc., Guillermo Corbeta, NFA and
GSIS to pay jointly and severally the following sums of
money:
i.
to pay plaintiff Gloria Kho Vda. de Calabia, the sum
of P8,935.06 for doctors fees, medicines,
hospitalizations and medical expenses; P2,319.00 for
transportation expenses; and P53.30 for telegrams;
P10,000.00 for the injuries she sustained; P12,000.00
loss of income for six months.
ii. to plaintiff Victoria Kho, the sum of P832.00 for
hospitalization and medicines; P10,000.00 for the
injuries she sustained;
iii. to the heirs of Wellie [Willie] Calabia, Roland Kho
and Maxima Uhmad [Ugmad] Vda. de Kho, the sum of
P7,500.00 as funeral expenses less P5,000.00 advanced
by defendant Victor Uy.
iv. to the heirs of Wellie [Willie] Calabia, Sr., heirs of
Roland Kho and heirs of Maxima Ugmad Vda. de Kho;
P30,000.00 each as compensatory damages.

c) To pay plaintiff the sum of P10,000.00 as attorneys

fees and expenses of litigation;
d) Dismissing defendants counterclaim, and crossclaim; and
e) To pay the costs.
That this decision is without prejudice as to the right of
Mabuhay Insurance & Guaranty Co., Inc., and NFA to
recover from Guillermo Corbeta and GSIS the amounts
they may have paid by virtue hereof.[2]
For purposes of this review, we deem as also
assailed the disposition by the trial court in its Order
issued on July 12, 1985, modifying its original decision,
by awarding moral damages to the heirs of the
deceased victims, as follows:
Considering that the dispositive portion of the decision
in this case, an award of P10,000.00 each made to
plaintiffs Gloria Kho Vda. de Calabia x x x, for injuries
they sustained, this award, through [sic] not clearly
stated in the decision, is the moral damages the instant
motion seeks to obtain. However, the prayer for moral
damages for the death of the three (3) persons abovementioned is proper. (citation omitted)
In view of the foregoing, the prayer of plaintiffs Gloria
Kho Vda. de Calabia and Victoria Kho for an award of
moral damages in their favor is hereby
denied. However, as for the death of Wellie [Willie]
Calabia, Sr., Rolando Kho and Maxima Ugmad Vda. de
Kho, an award of moral damages is hereby made, and
ordering and directing defendants Mabuhay Insurance
and Guaranty Company Inc., Guillermo Corbeta,
National Food Authority and Government Service
Insurance System to pay jointly and severally the
following sums to wit:
P10,000.00 to the heirs of Wellie [Willie] Calabia, Sr.
P10,000.00 to the heirs of Rolando Kho and
P10,000.00 to the heirs of Maxima Ugmad Vda. de Kho
xxx
IT IS SO ORDERED.[3]
The relevant facts as found by the trial court are as
follows:

National Food Authority (NFA, formerly National

Grains Authority) was the owner of a Chevrolet truck
which was insured against liabilities for death of and
injuries to third persons with the GSIS.
On May 9, 1979, at about 7:00 in the evening at
Tabon-Tabon, Butuan City, the said truck driven by
Guillermo Corbeta collided with a public utility vehicle,
a Toyota Tamaraw. The Toyota Tamaraw was owned
and operated by Victor Uy, under the name and style of
Victory Line. The Tamaraw was a total wreck.
All the collision victims were passengers of the
Toyota Tamaraw. Five (5) passengers died[4] while ten
(10) others sustained bodily injuries. Among those
injured were private respondents, Victoria Jaime Vda.
de Kho and Gloria Kho Vda. de Calabia. Among the
dead were Maxima Ugmad Vda. de Kho, Roland Kho
and Willie Calabia, Sr.
Three (3) cases were filed with the Court of First
Instance of Agusan del Norte and Butuan City. The first,
Civil Case No. 2196 for quasi-delict, damages and
attorneys fees, was commenced by Uy on June 5, 1979
against NFA and Corbeta. On August 27, 1979,
the second, Civil Case No. 2225 for damages, was filed
by an injured passenger, Librado Taer, against Uy, the
operator of the public utility vehicle, and insurer,
Mabuhay Insurance and Guaranty Co. (MIGC). In turn,
Uy filed a cross-claim against MIGC and a third-party
complaint against Corbeta and NFA. The third, Civil
Case No. 2256, was instituted by herein private
respondents on November 26, 1979 against the
following: NFA and Corbeta for damages due to quasidelict; GSIS as insurer of the truck; Uy for breach of
contract of carriage; and MIGC as insurer of the Toyota
Tamaraw. These cases were consolidated and partially
tried by Judge Fortunato A. Vailoces, of the then Court
of First Instance of Agusan del Norte and Butuan City.
These cases were later on transferred to Branch II
of the Regional Trial Court of Butuan City. Trial ensued
and on April 30, 1985, the court rendered its
decision[5] holding that Corbetas negligence was the
proximate cause of the collision. The findings of the
trial court stated that the truck which crossed over to
the other lane was speeding because after the collision,
its left front wheel was detached and the truck traveled
for about fifty (50) meters and fell into a
ravine.[6] Likewise, the court concluded that if both
vehicles had traveled in their respective lanes, the
incident would not have occurred.[7] However, the
Chevy cargo truck had crossed over to the other lane
which, under traffic rules, was the lane of the Toyota
Tamaraw.[8]

In Civil Case No. 2196, the trial court awarded Uy

the total amount of one hundred nine thousand one
hundred (P109,100.00) pesos for damages. In Civil Case
No. 2225, said court dismissed the case against Uy and
ordered MIGC, Corbeta and NFA to pay plaintiff Taer,
jointly and severally, the total amount of forty thousand
five hundred fifty-nine pesos and ninety four centavos
(P40,559.94) for actual, compensatory, and moral
damages plus attorneys fees. Damages were likewise
awarded to the herein private respondents in Civil Case
No. 2256, as earlier mentioned.
Corbeta and NFA appealed the decision of the trial
court in Civil Case Nos. 2196, 2225, and 2256 to the
Court of Appeals. GSIS also elevated the decision in
Civil Case No. 2256 to the same appellate court. The
appeals were docketed as C.A.-G.R. Nos. 19847, 19848,
and 19849.
The Court of Appeals agreed with the conclusions
of the trial court and ruled as follows:
WHEREFORE, in view of the foregoing considerations,
and finding no reversible error, the decisions of the
Court a quo in Civil Cases Nos. 2196, 2225 and 2256 are
hereby AFFIRMED in toto, with costs against the
appellants.
SO ORDERED.[9]
On February 5 and 6, 1991, GSIS and NFA filed their
motions for reconsideration respectively, which were
denied
by
the
respondent
court
in
its
Resolution[10] dated August 13, 1991.
On October 4, 1991, only GSIS filed this petition for
review on certiorari based on the following assigned
errors:
1. The respondent court erred in holding GSIS
solidarily liable with NFA.
2. The respondent court erred in holding GSIS
liable beyond the terms and conditions of
the contract of insurance and the
limitations under Insurance Memorandum
Circular (IMC) No. 5-78.
3. The respondent court erred in holding GSIS
liable without proof that a notice of claim
had been filed within six (6) months from
the date of the accident.
We find pertinent the following issues:
1) Whether the respondent court erred in
holding GSIS solidarily liable with the

negligent insured/owner-operator of the

Chevrolet truck for damages awarded to
private respondents which are beyond the
limitations of the insurance policy and the
Insurance Memorandum Circular No. 5-78.
2) Whether the respondent court failed to
consider that the private respondents have
no cause of action against the petitioner,
allegedly for failure of the victims to file an
insurance claim within six (6) months from
the date of the accident.
Petitioner denies solidary liability with the NFA or
the negligent operator of the cargo truck because it
claims that they are liable under different obligations. It
asserts that the NFAs liability is based on quasi-delict,
while petitioners liability is based on the contract of
insurance. Citing articles 1207[11] and 1208[12] of the
Civil Code of the Philippines, petitioner states that when
there are two or more debtors or two or more
creditors, the obligation as a general rule is joint. It
claims that the only exceptions are: (1) when there is a
stipulation for solidary obligation; (2) when the nature
of the obligation requires solidary liability; and (3) when
the law declares the obligation to be solidary. However,
since neither the provision of the contract nor the
insurance law provides for solidary liability, petitioner
asserts that the presumption is that its obligation arising
from a contract of insurance is joint.
Petitioners position insofar as joint liability is
concerned is not tenable. It is now established that the
injured or the heirs of a deceased victim of a vehicular
accident may sue directly the insurer of the
vehicle. Note that common carriers are required to
secure Compulsory Motor Vehicle Liability Insurance
[CMVLI] coverage as provided under Sec. 374[13] of the
Insurance Code, precisely for the benefit of victims of
vehicular accidents and to extend them immediate
relief.[14] As this Court held in Shafer vs. Judge, RTC of
Olongapo City, Br. 75:[15]
Compulsory Motor Vehicle Liability Insurance (third
party liability, or TPL) is primarily intended to provide
compensation for the death or bodily injuries suffered
by innocent third parties or passengers as a result of a
negligent operation and use of motor vehicles. The
victims and/or their defendants [dependents] are
assured of immediate financial assistance, regardless of
the financial capacity of motor vehicle owners.
xxx

The injured for whom the contract of insurance is

intended can sue directly the insurer. The general
purpose of statutes enabling an injured person to
proceed directly against the insurer is to protect injured
persons against the insolvency of the insured who
causes such injury, and to give such injured person a
certain beneficial interest in the proceeds of the policy,
and statutes are to be liberally construed so that their
intended purpose may be accomplished. It has even
been held that such a provision creates a contractual
relation which inures to the benefit of any and every
person who may be negligently injured by the named
insured as if such injured person were specifically
named in the policy. (S 449 7 Am. Jur., 2d, pp. 118119)[16]
However, although the victim may proceed directly
against the insurer for indemnity, the third party liability
is only up to the extent of the insurance policy and
those required by law. While it is true that where the
insurance contract provides for indemnity against
liability to third persons, and such third persons can
directly[17] sue the insurer, the direct liability of the
insurer under indemnity contracts against third party
liability does not mean that the insurer can be held
liable in solidum with the insured and/or the other
parties found at fault.[18] For the liability of the insurer is
based on contract; that of the insured carrier or vehicle
owner is based on tort.[19] The liability of GSIS based on
the insurance contract is direct, but not solidary with
that of the NFA. The latters liability is based separately
on Article 2180[20] of the Civil Code.[21]
Obviously, the insurer could be held liable only up
to the extent of what was provided for by the contract
of insurance, in accordance with CMVLI law. At the
time of the incident, the schedule of indemnities for
death and/or bodily injuries, professional fees, hospital
and other charges payable under a CMVLI coverage was
provided under the Insurance Memorandum Circular
(IMC) No. 5-78 which was approved on November 10,
1978. As therein provided, the maximum indemnity for
death was twelve thousand (P12,000.00) pesos per
victim.[22] The schedules for medical expenses were also
provided by said IMC, specifically in paragraphs (C) to
(G).
Consequently, heirs of the victims who died in the
May 9, 1979 vehicular incident, could proceed (1)
against GSIS for the indemnity of P12,000 for each dead
victim, and against NFA and Guillermo Corbeta for any
other damages or expenses claimed; or (2) against NFA
and Corbeta to pay them all their claims in full.

It follows also that injured victims, Gloria Kho Vda.

de Calabia and Victoria Kho, could claim their medical
expenses for eight thousand nine hundred thirty-five
pesos and six centavos (P8,935.06) and eight hundred
thirty-two (P832.00) pesos, from any of the
following: GSIS, NFA, or Corbeta. As to the other
damages, only NFA or Corbeta may be held liable
therefor.
Computation of hospital charges and fees for the
services rendered to the injured victims was
conclusively established by the trial court. The
petitioner failed to object to the evidence thereon,
when presented by the private respondents during the
trial. Thus, these factual bases for the award of
damages may no longer be attacked. For generally,
findings of the judge who tried the case and heard the
witnesses could not be disturbed on appeal, unless
there are substantial facts and particular circumstances
which have been overlooked but which, if properly
considered, might affect the result of the case.[23] Thus,
considering the evidence on record including the
schedule of indemnities provided under IMC No. 5-78,
we find no cogent reason to disturb the computation of
medical charges and expenses that justify the award of
damages by the trial court.
As to the second issue, the petitioner contends
that it cannot be held liable without proof nor
allegation that the private respondents filed before its
office a notice of claim within six (6) months from the
date of the accident. This requirement, according to
the petitioner, gives the insurer the opportunity to
investigate the veracity of the claim, and noncompliance therewith constitutes waiver. Since the
claim was not reported to the insurer, the petitioner
avers that the presumption is that the victim opted to
pursue his claim against the motor vehicle owner or
against the tortfeasor.
However, in this case the records reveal that on
September 7, 1979, the private respondents sent a
notice of loss to the petitioner informing the latter of
the accident. Included as Exhibit J[24] in the records,
this notice constitutes evidence of the loss they
suffered by reason of the vehicular collision. They
stressed further that the petitioner did not deny receipt
of notice of claim during the trial, and it would be too
late now to state otherwise.
Although merely factual, we need to emphasize
that the alleged delay in reporting the loss by the
insured and/or by the beneficiaries must be promptly
raised by the insurer[25] in objecting to the
claims. When the insured presented proof of loss

before the trial court, the insurer failed to object to said

presentation. The petitioner should have promptly
interposed the defense of delay, or belated compliance,
concerning the notice of claim. Moreover, the
petitioner merely waited for the victims or beneficiaries
to file their complaint. As matters stand now, the
defense of laches or prescription is deemed waived
because of petitioners failure to raise it not only before
but also during the hearing.[26]
To recapitulate, petitioner seeks a definitive ruling
only on the extent of its liability, as insurer of NFA, to
those injured or killed in the May 9, 1979 vehicular
collision.
As found by the trial court, the driver (Guillermo
Corbeta), the operator (NFA), and MIGC, are solidarily
liable for damages as computed below:
SCHEDULE A
I. For the Injured Victims
1) Gloria Kho Vda. de Calabia
a) Medical expenses
P 8,935.06
b) Transportation and Telegraph
Expenses
2,372.30
c) Other Compensatory/Moral
Damages
10,000.00
d) Loss of Income
12,000.00
Total
P 33,307.36
2) Victoria Kho
a) Medical expenses
P 832.00
b) Other Compensatory/Moral Damages 10,000.00
Total
P10,832.00
II. For the Heirs of the Deceased Victims:
Compensatory/
Funeral
Death
Moral
Expenses
Indemnity
Damages
Total
1) Heirs of Willie Calabia, Sr. P
2,500.00
P30,000.00
P10, 000.00
2) Heirs of Roland
Kho
2,500.00
42,500.00

30,000.00

42,500.00

10,000.00

3) Heirs of Maxima Ugmad Vda.

de
Kho
2,500.00
30,000.00
10,000.00
42,500.00
Sub-Total
7,500.00
0

P
P90,000.00

P30,000.00 P127,500.0

Less: Advances by Victor

Uy (5,000.00)
NIL
Balance
0,000.00

(5,000.00)

P2,500.00
122,500.00

P90,000.00

P3

III. Total Amount of Attorneys

Fees
P10,000.00
Note that, the petitioner (GSIS) was impleaded as
insurer of NFA. But under the CMVLI law, the petitioner
could only be held liable under its contract of
insurance. And pursuant to the CMVLI law, its liability is
primary, and not dependent on the recovery of
judgment from the insured. Hence, GSIS is directly
liable to the private respondents, in the following
amounts:
SCHEDULE B
I. Injured Victims

Medical expenses

1) Victoria Jaime Vda. de Kho

P 832.00

2) Gloria Kho Vda. de Calabia

P 8,935.06

II. Heirs of Deceased Victims

Death Indemnity

1) Heirs of Willie Calabia, Sr.

P 12,000.00

2) Heirs of Roland Kho

12,000.00

3) Heirs of Maxima Ugmad Vda. de Kho 12,000.00

The balance of the private respondents claims as
shown on Schedule A above, must be paid by Corbeta
or NFA, or MIGC, the parties found solidarily liable.[27]
WHEREFORE, the instant petition is hereby
GRANTED, but the decision of the trial court as affirmed
by the Court of Appeals is hereby MODIFIED, as follows:
1. Petitioner Government Service Insurance
System is ordered to pay (a) twelve
thousand pesos (P12,000.00) as death
indemnity to each group of heirs of the
deceased, Willie Calabia Sr., Roland Kho
and Maxima Ugmad Vda. de Kho; (b) eight
hundred thirty-two (P832.00) pesos for
medical expenses of Victoria Jaime Vda. de
Kho; and (c) eight thousand, nine hundred
thirty-five pesos and six centavos
(P8,935.06) for medical expenses of Gloria
Kho Vda. de Calabia.

2. Guillermo Corbeta, National Foods

Authority, and Mabuhay Insurance &
Guaranty Co., Inc., jointly and severally, are
ordered to pay private respondents
claims[28] as adjudged by the Regional Trial
Court of Butuan City, minus the amounts
that GSIS must pay to the injured victims
and the heirs of the deceased victims as
abovestated.
This decision is immediately
pronouncement as to costs.
SO ORDERED.
Bellosillo (Chairman

executory. No